What is Premature De-industrialisation?

Premature de-industrialisation is a phenomenon in which a country's industrial sector experiences a decline in productivity, employment, and output, despite still being in the early stages of economic development.

Causes

There are several factors that can cause premature de-industrialisation, including:

• Economic policy: Policies such as trade liberalisation, fiscal austerity, and structural adjustment programmes such as those imposed by the IMF can lead to the closure of inefficient or uncompetitive industries, as well as the erosion of domestic manufacturing production and employment.
• External competition: Countries that are highly dependent on exports and are exposed to global competition may be more vulnerable to premature de-industrialisation if they are unable to compete with other countries in terms of productivity, efficiency, and innovation and whose unit labour costs are lower. Capital investment tends to flow to countries with the lowest unit labour costs.
• Resource curse: Countries that are heavily dependent on natural resources may experience premature de-industrialisation if they are unable to diversify their economies and create new industries.
• Technological change: The rapid pace of technological change can lead to the obsolescence of certain industries and the emergence of new ones, which can result in the decline of some sectors and the growth of others.
• Climate change: The effects of climate change on agriculture, water availability (water scarcity) and other areas can lead to the decline of certain sectors and the growth of others, and can also lead to a decline in productivity and output.

Examples

There are several countries that have been identified and recognised as experiencing premature de-industrialisation, including:

• Argentina: Argentina has experienced a decline in its manufacturing sector despite being at an early stage of economic development. This has been attributed to a combination of factors such as trade liberalization, currency devaluation, and a lack of investment in infrastructure and technology.
• Brazil: Brazil has also experienced a decline in its manufacturing sector, which has been attributed to a combination of factors such as economic instability, lack of investment in infrastructure and technology, and a heavy reliance on natural resources.
• South Africa: South Africa has experienced a decline in its manufacturing sector, which has been attributed to a combination of factors such as a lack of investment in infrastructure and technology, as well as competition from low-cost imports.
• Venezuela: Venezuela has experienced a decline in its manufacturing sector, which has been attributed to a combination of factors such as economic instability (including hyper-inflation) lack of investment in infrastructure and technology, and heavy reliance on oil exports.

The causes of premature de-industrialisation can be complex and multifaceted, and can vary from country to country.

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